How To Manage A Roth IRA For The Most Benefits

How to manage a Roth IRA

The investment practices you use can make a big difference, especially when it comes to long-term investing, such as retirement accounts. In order to maximize your Roth IRA returns, learning how to manage a Roth IRA account is key.

What Is A Roth IRA?

A Roth IRA is an Individual Retirement Account that allows you to pay taxes on the money you put into it upfront. Your contributions and earnings grow tax-free, and you can withdraw them tax-free and without penalty after age 59½, as long as you’ve had the account for more than five years.

Other benefits of having a Roth IRA

  • No contribution age requirement. You can contribute at any age as long as you have qualifying earned income.
  • No Required Minimum Distributions (RMDs). No mandatory withdrawal requirement, allowing your savings to continue to grow even during retirement.
  • You’re not required to take distributions at a certain age, unlike the traditional IRA (which requires withdrawals beginning age 72).
  • No income taxes for inherited Roth IRAs. If you pass your Roth IRA onto your heirs, their withdrawals will also be tax-free. 
  • You can keep contributing to your Roth IRA if you choose to work past retirement age, as long as your income falls within the income limits.

How To Manage A Roth IRA

1. Open A Roth IRA Account

You can open a Roth IRA at many brokerage firms and banks in-person or online. When choosing, consider fees, available investments, available investment research materials and other features that may be important to you, like physical branch locations and customer service.

The great thing about Roth IRAs is that you don’t need to invest a whole lot of money to open an account. In fact, the IRS doesn’t require a minimum investment amount to open up a Roth IRA. Some mutual fund companies require an account minimum to open one, but you can start a Roth IRA with as little as $50 in most cases. 

That means there’s no reason to put off investing! Once you’re out of debt with a healthy emergency fund saved up, open a Roth IRA account!! Working with an investment professional can make the process feel like a breeze.

2. Maximize Contributions

For 2021, the total amount you can contribute to either a Roth IRA or a traditional IRA is $6,000—or $7,000 if you are age 50 or older. You could save $500.00 each month to reach the limit over the course of the year. With the magic of compound interest, that money can grow 4x or more by the time you’re ready to retire.


3. Is It Possible To Lose Money In A Roth IRA?

It is possible to lose money in a Roth IRA. The most common causes of a loss of money include negative market fluctuations, early withdrawal penalties, and an insufficient amount of time to compound. The more time you allow a Roth IRA to grow, the less likely you are to lose money.

 There’s always going to be an element of risk when you invest, but you can minimize your risk by diversifying your investment portfolio. Spread your investments among different types of higher risk and steadier, lower risk stock mutual funds.

4. Hold On To Your Money

Bad days are inevitable, if the market has a bad day, don’t panic and take all your money out of your Roth IRA. Part of knowing how to manage a Roth IRA is knowing when to hold on. That is the worst thing that you can do, because all you’re doing is locking in your losses. Let it ride and see what happens!

The difference between those who end up making good money off the stock market and those who lose money is giving up and selling too early. Build a diversified stock portfolio and hold on to it. If there’s a bad month, or even a bad year, do not worry.

The market always ticks upward again. Historically, the stock market has returned an average of 10% per year. If you want to know how to manage a Roth IRA plan on it being a long-term investment. You won’t find that rate anywhere else, but the key to scoring it big is to play the long game.

5. Watch Out For Fees

Maintenance fees

Many mutual fund companies and some financial services firms offer Roth IRAs with a minimal maintenance fee. These fees usually fall between $10 and $50 per year. However, many of today’s banks, brokerages, investment firms, and mutual funds no longer charge a fee.

Sometimes, they can be waived by meeting account minimums. On the other hand, paying a fee may also give you access to reduced price trades or other benefits.

While paying a fee usually isn’t desirable, there are larger fees that you could end up subject to pay as a part of your Roth IRA. If paying a $20 fee saves you $100 in commissions or $1,000 in expense ratios, it’s a good investment.

Management and transaction fees

The investments that you hold in your Roth IRA account may also have fees that eat into your returns. Many mutual and exchange-traded funds have built-in expense ratios that reduce returns.

For example, if you’re holding a fund that returns 6.3 percent per year after a 1.1 percent expense ratio, it’s really generating 7.4 percent. You just aren’t seeing all of it.

Investment Advisor Fees

If you have your IRA with an investment adviser, you may also be paying a fee that is in proportion to the size of your account. If you’re getting more value in terms of better returns or your adviser is saving you a great deal of effort, this fee may be a good investment.


ROTH IRA Investment Options

Mutual Funds

Mutual funds are a practical, cost-efficient way to build a diversified portfolio of stocks, bonds, and short-term investments. They represent professionally managed accounts. Mutual funds come in a broad range of asset classes. Many mutual funds allow small initial and subsequent investments with an IRA account. 


Stocks provide the growth potential, and the immediate impact of any gains can be sheltered inside of the Roth IRA until funds are withdrawn tax-free after retirement.

Exchange-traded funds 

Exchange-traded funds (ETFs) are a popular investment option. ETFs are similar to mutual funds but trade throughout the day. Like mutual funds, Exchange-traded funds come in a wide range of asset classes and investment styles and are professionally managed.

But ETFs trade just like individual stocks while the stock exchange is open. This means that investors can use stop orders, limit orders, and other tools. This helps ensure they buy or sell the ETF within a certain price range.

Bonds and US Treasuries

Fixed income investments generally pay a return on a fixed schedule, the amount of the payments can vary.

This income is taxed if held in a taxable account. But in a Roth IRA, the interest payments stay in the account and can be used for additional investments free of tax.

Great bonds for a Roth IRA include corporate bonds and other taxable bonds. Municipal bonds, whose income is tax-free, are better off held inside of a taxable brokerage account.

Real Estate Investment Trusts

If you’re hoping to get some real estate exposure in your existing Roth IRA without dealing with the complexities of self-direction or real estate ownership, REITs are a great alternative.

REITs can be bought and sold much like traditional assets like stocks and bonds, but they represent fractional shares of ownership in a variety of properties. Like apartment complexes, residential properties, office buildings, healthcare facilities, and more.

Manage Your Roth IRA With These Top Investment Accounts

If you’re going to have a Roth IRA, you need to have your money in the best Roth IRA investment accounts available. We selected six that we think are simply the best. They are not ranked in any specific order, but are based on how they stand out among the competition.

1. Charles Schwab

How to manage a roth IRA- Charles Scwab logo

Charles Schwab has it all. Great education and training programs for newer investors, high-caliber tools for active traders, responsive customer service and no trading commissions on stocks and ETFs. Schwab shines all around, and it remains an excellent choice to invest in a Roth IRA.

Schwab charges nothing for stock and ETF trades, while options trades cost just $0.65 per contract. And mutual fund investors are sure to find something to love in the broker’s offering of more than 4,000 no-load, no-transaction-fee funds. With no account minimum, it’s easy to get started.

If you want to learn more on how to manage a Roth IRA, then Charles Schwab can educate you with its resources. In addition to a fully-featured trading platform, the broker offers mobile trading as well as a more basic platform.

2. Betterment

Betterment logo

If you’re looking to have someone else do the investing and portfolio management for you, then Betterment is an excellent choice. Betterment is a robo-advisor that does all the heavy lifting, it selects the appropriate investments, diversifying the portfolio and allocating funds. So that you can focus on something else and it does that at a reasonable cost as well.

Betterment creates your portfolio, they rebalance it, reinvest dividends, and handle all the details for you. And they do it all for a low annual fee of just 0.25%.

There’s no minimum initial investment required. You can open an account, and fund it with payroll contributions. It’s the easiest diversified investment opportunity available.

3. M1 Finance

M! Finance logo

M1 Finance offers a simple platform that makes investing easy and painless while giving you more options than the standard robo-advisor. Choose from a variety of pre-made diversified portfolios which makes it easy to manage your Roth IRA.

Or customize your own by investing in individual Exchange Traded Funds (ETFs) or stocks. M1 Finance has an array of services with no management fees or commission so that you can squeeze the most out of your retirement savings. M1 Finance also lets you purchase fractional shares.

After you’ve divvied up your investment, you can now fund it and get the ball rolling. You can set up automated payments or make deposits manually. They continuously track your investments so that you don’t even need to think about it.

4. Fidelity Investments

How to manage a roth ira- fidelity investments sign

With its clean layout, helpful customer representatives, lack of commissions and overall low fees, Fidelity is an excellent broker for beginning investors. Or those opening their first Roth IRA.

Fidelity also features a well-developed educational section, which is great for customers who are new to investing and want to get up to speed. Fidelity also takes a customer-first approach.

The broker has slashed nearly all of its fees, including pricey transfer fees. It also slashed fees on its mutual funds, becoming the first broker to bring the expense ratio of mutual funds to zero (for a handful of its own funds).

5. Fundrise

Fundrise company logo

Real estate is a popular investment, and because it tends to pay cash dividends, it can be a smart investment for a Roth IRA, where dividends are earned tax-free. Fundrise creates real estate investment trusts, or REITs, using investors’ money to buy real estate or mortgages. 

Fundrise’s returns have been solid so far, steadily earning between 8.7 and 12.3 percent annually since 2014. And it’s relatively easy to get started with an account minimum requirement of just $500.

6. Merrill Edge

how to manage a roth ira- merrill logo

Merrill Edge is a web-based broker now owned by Bank of America. It’s perfect for those who already have an account at the bank. For those who need customer service in person, it might be just what they need.

Merrill is a solid, full-service broker that does a lot of things right. They provide insightful research from the broker’s large team of analysts, and offers solid educational resources for new investors looking to get up to speed.

But where it really out-distances the competition is its ability to provide in-person client assistance. If you’re near one of more than 2,500 Bank of America locations offering this service, you can access customer support right at the bank. If you need a more personalized financial plan, Merrill’s team can also provide financial planning services

In Conclusion

Get the most of a Roth IRA or any retirement savings account by using time on your side. The longer you have to allow your Roth IRA to grow with compound interest the better. So maximize the opportunity and get started today.


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